South West Coast MP Roma Britnell said the government sent letters to some recipients of COVID-19 licensed hospitality venue support grants last week after it was found that a "department error" had led to them being overpaid.

She said the businesses were required to repay those funds by February 16.

Ms Britnell said the state government was asking people to pay back money, but most had already used the cash to keep their head above water after having their business doors shut for months during the devastating second wave.

"This is a monumental stuff-up that is causing a great deal of stress for business owners who are really doing it tough," she said.

"These businesses had no idea they had been overpaid, they used the money to pay the bills and to keep operating, but then all of a sudden they get a letter of demand for significant amounts of money to be repaid within a couple of weeks."

A number of the grants recipients are south-west businesses who do not want to be named.

Ms Britnell said she had been contacted by several south-west business owners who were confused and angry about the government's stuff up.

"One of those businesses is being asked to pay back $10,000 by next week - this is a business whose trade was absolutely decimated because of restrictions, but the bills kept coming in," she said.

"This fund was there to help businesses that were some of the hardest hit by restrictions and lockdowns put in place to deal with the second wave of the virus in Victoria."

An administrative error in the Department of Jobs is being blamed for the error by Minister Martin Pakula.

It's understood some businesses were entitled to grant, paid $20,000 but were now being told to pay that all back.

Businesses are able to put in place a repayment plan.

It's understood that almost 300 businesses are being claimed to have been awarded grants they were not entitled to receive.

Gippsland business owner Jaci Hicken said she would report the state government to the Ombudsman after it incorrectly gave her a $20,000 grant and has now demanded it back.

Ms Britnell said that as found by the Coate inquiry, it was policy failures within the Andrews Government's hotel quarantine program which led to that second wave.

"Daniel Andrews used $7.7 million of taxpayers' dollars to defend his government at that inquiry, now he is asking the businesses hardest hit by the consequences of his government's failures to pay back money because of yet another stuff up in his government," she said.

"There is a very clear double standard here and it's a double standard that Daniel Andrews must rectify immediately."

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